Timing Outlook Remains High at 9.5

1. Summary

Since the last report about a month ago, the market has continued to go pretty steadily upward, making gains in 13 of the past 16 weeks through last Friday. Click on the chart to enlarge it.

The Timing Outlook remains elevated at 9.5. As last time, the only indicator that is neutral instead of positive is Morningstar’s Market Valuation Graph. Every other indicator is positive.

My Capital Gains Portfolio remains 100% invested in SPY, an index-tracking ETF. As explained in previous posts, most of my time recently has been devoted to working on the 2011 edition of TOP 40 DIVIDEND STOCKS, which I published on January 14. So I have not had time to evaluate individual stocks for the Capital Gains portfolio. The SPY shares are protected by a tight 5.5% trailing sell-stop. Incidentally, you may notice on the chart several red “down” days recently and be wondering why that is not a “sell” signal since it fails my 2/3 up-days requirement. The answer is that once the money is invested, any selling is determined by the sell-stop, not by the original entry requirements.

The rally is the kind I like—steady with little volatility. That makes it an easy trend to identify and to stay with. My confidence in the rally has improved as the trend has lengthened, but of course the 5.5% sell-stop represent my respect for the risk that any trend can reverse at any time.

My Dividend Growth Portfolio, as usual, is 100% invested. I accumulated enough dividends in early January to reinvest them, and I used the opportunity to pick up 20 more shares in Abbott Labs. If you are interested in learning more about TOP 40 DIVIDEND STOCKS FOR 2011, click here. The description page for this annual e-book has been completely updated on my website for the new edition.

2. Market Performance Since Last Outlook
(“now” figures are as of mid-day Monday January 24, 2011)

Last Outlook (12/4/10): 9.5 (positive)
S&P 500 last time (12/4/10): 1259
S&P 500 now: 1287 Change: +2%

S&P 500 at beginning of 2011: 1258
S&P 500 now: 1287 Change in 2011: +2%

S&P 500 at close 3/9/09 (beginning of bull market): 677
S&P 500 now: 1287 Change since 3/9/09: +90% (in about 23 months)

3. Indicators in Detail

• Conference Board Index of Leading Economic Indicators: January’s report, out last week, showed another increase, the 6th in a row. That keeps this indicator positive. +10

• Fed Funds Rate: No change. The Fed continues to be clearly committed to a loose money policy until the economy is well into recovery or they become concerned with inflation. Positive. +10

• S&P 500 Market Valuation (P/E): Morningstar pegs the current operating P/E of the S&P 500 at 15.5, up just slightly from 14.7 last time. This is well within positive territory (any value below 17.4). +10

• Morningstar’s Market Valuation Graph. Morningstar’s market valuation graph is at 1.04, down from 1.05 last time, continuing to suggest that the market is slightly overvalued right now. This is still well within my +/- 10% range of 1.00 for calling this indicator neutral. +5

• S&P 500 Short Term Technical Trend: All of the technical indicators are in the same configuration as last time. On the chart above, the 20-day simple moving average (SMA) is the green line, the 50-day is the blue line, and the 200-day is the red line. The short-term technical indicators use the two shorter (20-day and 50-day) simple moving averages (SMAs) of each index, and the current lineups are the best you can get: Index > 20-day > 50-day. +10

• S&P 500 Medium Term Technical Trend: The medium-term technical indicators use the two longer SMAs (50-day and 200-day) for each index. Right now all three indexes tell the same story: Index > 50-day >200-day. Positive. +10

• DJIA Short Term Technical Trend: Positive. +10

• DJIA Medium Term Technical Trend: Positive. +10

• NASDAQ Short Term Technical Trend: Positive. +10

• NASDAQ Medium Term Technical Trend: Positive. +10

TOTAL POINTS: 95
NEW READING: 95 / 10 = 9.5 = POSITIVE

TOP 40 DIVIDEND-GROWTH STOCKS FOR 2011 Is Now Available!

The new edition of the TOP 40 DIVIDEND-GROWTH STOCKS FOR 2011 was published on January 14, 2011. It is now available from my main website.  Click the cover image in the upper right corner of this Newsletter to go to a compalete description of the new edition.

Thanks again to all of you who sent me encouraging emails in the last few days of the homestretch of completing this year's edition! Additional and special thanks to those of you who talked me through my hard-drive crash and offered suggestions about how to back up my hard drive in the future. I will be enlisting a backup service shortly.

TOP 40 DIVIDEND STOCKS FOR 2011 Is Almost Complete

I am sitting in a condo in Naples, FL (my wife is out at the beach). Just as we were leaving for the 3-day drive down here on January 1, I discovered that my hard drive had crashed overnight. The technical term for this is "Happy New Year."

I couldn't do anything about it during the drive. As soon as we got here, we located a computer repair place. The verdict: Drive was broken. The data could be recovered. He didn't have my drive in stock but could get one overnighted. He had a "courtesy" computer that I could work on. So we moved two essential files from my busted hard drive onto a thumb drive and plugged it into the courtesy computer. The two essential files were the text and the document I was using to score the Finalists for the Top 40.

That's where I worked last week, at the repair shop. It took until Thursday for my laptop to be fixed and for all my data and programs to be moved over to it. So, each morning I went to the computer place, my wife did fun stuff. That's OK, I love producing this.

The good news is that no data was lost, and perhaps I worked more diligently under these conditions than I otherwise would have. It was a good week.

Here's where things stand:

• The Top 40 have been selected. I have gone throught their Easy-Rate sheets several times to check them for accuracy (tiny mistakes always creep in) and to fill in information from Yahoo that was not available from Morningstar. I have also created the four tables that help you find them (alphabetical; by Total Score; by Company Score; and by Yield).
• The text is essentially done. I need to update a couple portions of it, and I want to give it one more full reading before I let it go. I'm particularly focusing on two areas. First, I combined two chapters into one, and I want to be sure I did it without losing any essential information or creating redundancies. Second, the reason I combined the chapters was to create a little room for a new chapter on Retirement Funding. That chapter was created from my five-article series on retirement, so again I need to be sure I haven't lost any critical information. The new chapter presents things in a different order from the articles, so it was a complete re-write.

After the book itself is completed, I need to do some marketing and technical things. These include creating a jpeg of the cover to use as links throughout my web site and for display on other sites (I lost the little program I have always used for that conversion in the hard-drive crash). I want to update the "landing page" where the e-book is described on my web site. I need to combine the Top 40 pages (the Easy-Rate sheets and the tables) with the text itself to create the finished product. Then that document (which is in Word) needs to be converted to a pdf file. I need to remove the 2010 edition from Payloadz and upload the 2011 edition in pdf form. Finally, I need to make sure PayPal understands what is going on. Then my wife and I will make test purchases to be sure it all works as it should.

My target date to get this all done is a week at the most. That would mean availability on 1/18--last year's launch date was 1/19, so that would be about the same.

Two questions for anybody who cares to respond:

• A couple of people have expressed interest in having all four editions available for comparison and to see the "flow" of information as this series has developed over the years. I could work out some sort of combo package if there is enough interest. One thing I'd have to check would be size problems--the combined document would be well over 400 pages, which could create upload problems at my end or download problems at your end. Maybe just offer past editions individually at a big discount?
• My wife has offered to do the work required to offer a print version. She would get it printed at FedEx Office or somewhere, put a simple cover on it, and mail it out. I don't know the additional cost, I imagine it would be somewhere between $15-$20. I also don't know if Payloadz can take orders for a physical product rather than a pdf download.

OK. Writing this was my break for this morning. Time to get back to work. I want to thank the many of you who have sent encouraging notes and emails. They are really inspirational to me, and I appreciate them immensely. The same goes for the questions some of you have sent. They get me thinking and also give me great insights into the audience for this e-book. All of the messages I have received combine to form a sort of virtual focus group, and that helps me design the product in the way that will help the most people. Thanks very much.